Q4 2020 Viomi Technology Co Ltd Earnings Call
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Hello, Ladies and gentlemen, thank you for standing by for via <unk> Technology Co Ltd for fourth quarter and full year 2020 earnings conference call.
At this time all participants are in listen only mode. Today's conference call is being recorded I will now turn the call over to your host Ms. Cynthia.
Yeah, Lee Senior IR manager of the company. Please go ahead Cecilia.
Thank you, operator, and Hello, everyone, and Hamburg County, and Balmy Technology called me and retained earnings conference call for the fourth quarter and full year 2020. As a reminder, this conference is being recorded and countless net financial and operating results were issued and press release earlier today and are posted on like you can download on your friends for life and stocked up on how are you.
And our distribution list by visiting the architecture and.
Website at IR day count.
And respond or chairman of the board of directors and the chases idea Gafisa and mystery shopping channel will begin with prepared remarks and had our finance team Mr. Wei County tie with John and the Q&A session before.
Before we continue please note today's discussion will contain forward looking statements made and they're just a cap on publishing and somebody you as proud. They forget his litigation Reform Act of 1995 for him and his day milk and volley Hey, every other risks and uncertainties and such to come in and actual results may be materially different from the music expressed today further information regarding these.
And the other way and answer it and this is included in accounts annual report on form 20-F, and other filings as filed and what do you have to go and it's F. E C and tell me it doesn't assume any obligation to update any forward looking statements.
Except as required by law.
Please also note on our earnings press release, and this conference call include discussions about and audited GAAP financial information as well as and audited non-GAAP financial measures, but on this press release contains a reconciliation you have to and audited non-GAAP measures to the an audit and most of the night there I can pull a comparable GAAP measure.
I'll now turn the call over to our founder and CEO, Mr. Xiaoping Chen Mr. Chen will deliver his remarks and Chinese although you may definitely by English translation, and let me start.
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Okay. Thank you and Mr Chen and I will quickly.
And I have found this remarks before discussing our financial performance for the fourth quarter of 2020.
Hello, everyone and thanks for joining our fourth quarter and all your 2020 earnings conference call well deliver robust full year growth of 25, 3%. Despite the macroeconomic uncertainties and a challenging environment for the whole industry and in line with what we communicated on and Doctor on his call, we effectively debt on our quality growth strategy and the fourth quarter.
And Mike our business and product mix, and a phone and improve our business operations, realizing a meaningful recovery and gross margin gross margin for the fourth quarter increased to 23 five per cent from $17 one per cent for the third quarter up out here.
And 19, 9% football coronary out 2019 on where they'll continue to excel on this growth strategy and you've got some more resources and branding and R&D for our Iot products as well as our services.
And yes, we have seen the momentum and the Iot industry continues to develop with and talented team, which did help scenario to be a key application areas and this holistic Iot solutions based on health services and hardware to be on.
Flourishing channel in this industry and the past two years would you happen to validate a five day alcohol structure, which integrates technology framework sensors.
Algorithms plug out teach and modules and the smart hardware, so delivered cost per Doc and call scenario interactions through our and 90 Iot, particularly on the body.
And that's in part and part of our quality growth Jackie and are focusing our R&D. All we continue to roll out more diversified and new projects with a focus on a seamless integration.
And Iot technology, how do we know cats can use with higher margin and higher average selling prices on main driver and see if that would go off and margin uplift and and pass them off we have introduced the super and mediums and Saracen and why did you buy us and to our new Primo water and fire a sub brand the chance yet on your App.
Hey, yourself 20 of our fist fight you'd like to go on with Greta I bought I washing machines, and whereas other new wins, I wash and dry up together with steroids of smart home devices and including the five geologist to pay per that's real truth and Iot chips.
In particular, our you know what if it's by sector, we see all day to address and mounts. It uses as well as takeaway environmental protection concerns. We are part and now to double reserve osmosis technology to realize margin flux and improve water purification and sensing.
There was a sudden and introduced a new high and what if you fire, which leaves beneficial minerals and to watch her during the purification process, allowing us to meet their demands and we income to human health.
Oh, and donations and what if the vacation time and largest hobby highly recognized by industry experts and last week, a group of experts on professional and academic organizations, including the Chinese Association for quality inspection Chinese Academy of Engineering, and Engineering School of Qinghai University participate in and is definitely on the two of our water and vaca.
And our technology. The result out of this is Jeff and then and looked at our technology were recognized as industry, leading outweighs the potential voice for the application and what if indication on area.
And you get to the average that's definitely on the Grub stand out on mineral water and fire for household and Theyre similar purposes was obviously only launched.
The successful launch and domestic and overseas and rapid development of our new bound me, Randy and swim and Lubbock was also a key pillar of Alberta profitability improvement in the fourth quarter, and we now need and dedicated sweeper robot team commenced it does slip of rub on manufacturing our own factory what came out of this look at the balance.
And and introduction of auto definitely I can see where the rubber such as alpha.
And with the success of exports and abuse sweeper robots and its growth and momentum will continue to roll out more diminished a day at pages and expanding into more domestic and global market.
We are also seeking to provide more comprehensive Iot house and solutions, consisting of Iot protective services and internet content with regards to them down and adding content business and we introduced a surety of service packages, including stuff and we're based product and mentioned you and somebody sees repurchased of comms as well to Internet and <unk>.
Tamara and content, we continue to operate our largest flow you have to do it or operating system.
Although we have a co op fishing with Dow in Cook on music I T E C malaria and adult work, we recently expanded cooperation with additional third party platforms, Chipotle and reach our large screen Internet resources.
Trade and differentiated kitchen scenario experience as well as on Tracy was taking it.
Now moving to our investment and endeavors and R&D are we have achieved a solid performance and patch and innovation. That's at the end of last year and number of hours assimilate tape and domestic and global patent application had reached over 3000, well on wage over 2004, Hendry and we're already registered.
And this January we recognized one of top 100 innovative companies and Guangdong.
Demonstrating our technology recognition and new consumer Iot market.
As we progress day into 'twenty, one and why don't we have continued to execute all have a quality growth chaouchi through the introduction of new high and production optimization and for their lives and spacing out that's a big opinions with lower margin what about I was talking about the more resources and Randy and the R&D for a lot of Iot per that says.
As the Iot services to them to help him on.
Our five G I O T a hamster stay on the user experience.
And with a focus on and I I and if somebody vacation, whether they will launch more new products, including and why don't you fire. So remember about batch air conditioners, and smart codecs among others.
And our upcoming free new product launches and in the early April.
Oh, well, there where the operating mine oxide services to them and the extent of lifestyles and experienced channel. It was to realize meaningful business extension from term and yourself to use your operation on.
I love, the product and technology innovation Iot experience and what at the service optimization are the key drivers and our launch and development.
The construction of China's logging infrastructure half demonstrating rapid development and are all on the commercial application of Iot is on her way. According to data released by D. C. H five personality by fish and while they connected to the Internet and 15 per se on what they can add two Iot by 2021 2020 two.
I was pointing out and a guy like low construction and other national AI CNS, just don't like nausea, Buddy and Ministry of industry and information technology and other nationalities show with departments and last July that's my home products and applications, where they promote it adds one they are important and those trees in this area.
We believe that with our rapid application of five G and the continuous improvement and that's my home ecology, Iot will be applied and Morientes low homes and the arrows are we on.
Coffee on Ehow, and leading position in this industry as well and capabilities to deliver a robust and stable growth of them and Kenny a healthy level of profitability, bringing long term value to our shareholders.
Well that concludes our formal remarks.
And that's now to ensure that detail on you should view after fourth quarter of 2020 is why our outlook for the first quarter of 2021.
And net revenues were $1 eight and I've been a R. M D and represented a year of your inquiries about $8 five firsthand the growth was slightly below our previous guidance by just around the airports six per se on primarily due to debt proactive step to stop the cell surface down, especially if they put that with lower average selling prices and lower.
And my against such has some of the Oems and refrigerators and washing machines and in order to make room for the launch of our first laid up new large screen refrigerated and high and and washing machines as well as to improve the profitability.
Revenue from outside the home portfolio and increased about 15, four 7% to one point 11 bidding R&D from Nash and injuries and 63% on meeting RMB for the first quarter of 2019, primarily driven by the sofa and stealth increase of fall a certain new product categories and how do you figure out a simple robots.
But let me Brian it's whoever robot business is expected to make greater contributions are in 2020 one.
Revenue from our home audio solutions decreased by five point Night Christians Jews and 363, many R&D. The decline was primarily due to debt day Christmas and the App.
We're just selling price yourself out xiaomi branded and white, if you fly up her ducks. This was partially upset by the successful introduction and the increased itself of our new series simple Balmy brand and why do people buy our product, which narrowed to day year over year decline for home water solutions compared to the previous quarter.
The army, Brian and wildfires are excited to make a major contribution and our home watch and solution business and as well as of our total net revenues in 2020 one.
Revenues from consumables increased about 16, nine three per cent or 106 people and too. Many R&D are primarily due to increase the amount of flower and what if if I feel and have put us revenue.
Revenues from small accounts and others decreased by $15 five person to 251 point to me anyway, and B, primarily due to product portfolio optimization for higher gross margin and this category.
Gross profit increased by 28 gross down to 404 three points as many I N V and gross margin was 23 25 per cent compared to a 17th on one for the third quarter of last year and $19 nine per se on for the fourth quarter of 2019 other quarter, all the quadri on and you're all the Euro inquiry.
And seeing gross margin were primarily driven by our efforts to reshape the business and put on mix toward higher gross margin gross margin product.
Food and the rollout and as our new Balmy branded why did it fires and that's where the robots.
One side to the optimization of margins and cost per life.
Asked Mr Chan and just got the domain and a full recovery.
Margin was in line with our quality growth chaouchi, demonstrating our business flexibility and our strong execution capabilities.
And we continue to face out of lower margin products and a focus colorful efforts on generating greater around me and contributions from higher margin product categories, and that's key and.
We do expect to experience.
Oh, not phone degree up gross margin recovery in 2020 one.
The total operating expenses increased by 21 three per cent due to a 300 and the 31.8 mini RMB, primarily due to the growth of our business as well as inquisitive and R&D expenses and selling and marketing expenses.
And more detailed R&D expenses increased by 41.8 prevention and 93.1, many R&D selling and marketing expenses increased by 17, four 3% to 217 point for many R&D and G&A expenses decreased by five seven percentage in 'twenty, one for streaming and R&D.
And net income attributable to ordinary share holders of the company increased by 23.3 person G 110.6, many R&D and non-GAAP net income attributable to ordinary share holders and becoming the increased by $15 three person to $115 five mini RMB.
Additionally, our balance sheet and remain healthy as of December 31st to 2020, we had a cash and cash equivalents of 500 and full 0.1, many R&D restricted cash of $17 6 million RMB short term deposits of Neely on the short term investments of $696 one many R&D.
Oh, we won't go into details on our full year 2020 result, but as mentioned earlier are they can be reviewed on our earnings press release.
Now, let's turn to other outlet for the first quarter of 2021 and we currently expect net revenue to.
Between now and your many RMB and 950 mini RMB, representing a year over year growth or wrong 17, 6% to 24 21 person.
Yeah, Bob on day case based on the current market conditions and there is nothing comedies tearing down preliminary estimates of market and.
Operating conditions and customer demand, which are all subject to challenge on.
So this concludes our prepared remarks, we will now open the call for the Q&A session and the head of our finance team, Mr, which I'm, sorry will join to fish any unanswered questions.
Operator, Please go ahead.
Thank you we will now begin the question and answer session.
I'll ask a question you May press Star then one on you touched on and zone.
If you are using speaker phone please pick up your handset before pressing.
To withdraw your question. Please press Star then two free.
The benefit of all participants on today's call. If you wish to ask a question to the company's management and Chinese vs immediately.
Question and English at this time, we will pause momentarily to assemble our own.
Yeah.
The first question today comes from million move with Morgan Stanley. Please go ahead.
Okay.
Thanks, a lot and make a ton zone, and Glen and Tony Omaha, and she's here a few tangshan Dino just shit when you're down on them and Pete do you go on a shoot going on and off.
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And you and women to Google and she'd offshore and loopholes and Knowhow, so much Houston ship channel.
And I'll Hubby, Xiaomi Chita fish, Amit, Utah, a foolish and shop. She told me that she said Oh no. It wasn't a finish out with them and to you.
I have two questions first before.
What's the company's 2021 strategy for the old branch and and Xiaomi brand and in particular is and air gun guidance by by categories and the second question and it's on channel what what's the strategy on the offline and online channel shifts in 2020 one Oh.
Especially with non we saw some and more expansion of online channel and.
Last year because of the COVID-19, so going on wears on what kind of shifts a week on the expect and.
And I'm a little bit of a number question is in 2020, what's the contribution mix from online and offline breakdown by Xiaomi channel on non Xiaomi channel and a non xiaomi offline channel. Thank you very much.
Yeah.
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For the first crusher cool wildly branded business and we can luckily for multiple perspectives.
We will ship, the Wyoming brand business and put them to work diversification, we are introducing more high end products with more advanced technologies, and that's where all of those place on some specific skus with lower module and so of course for the lines such as from his previous of low and washing machines and.
Refrigerators with touch screens.
And with.
With regard to the key categories, we will focus more on business was higher margin and good schools and momentum such as on brand and water purifiers and sweeper robot.
So rami Brenda water purifiers, and really introduced curious of large French water purifiers and the second half of 2020 and we saw robust sales of some of new products, such as shown on deal and new instances and water purifiers and Opco introduced.
Also send and water purifiers and industry developed too large for us.
And the industry data also showed the sales contribution of large process as well as the instant hit and water purifiers on increasing.
With that Romney brand and work agree with Bob's business to deliver greater revenue contribution and both of home water solutions and of our overall revenues in 2021.
We will also invest more and all xiaomi branded sweeper robot and particular in overseas market, which we just bought two and solid.
Gross.
How should we have this band and our slipper world with him and his polling and additional global markets and tune those per wildly from this would be well above.
And if things the revenue contribution from this category will increase as well.
In terms of technology application.
How should we discussed earlier, we will focus more on AI and some other application, which we plan to keep part of Iot products.
And our upcoming new product launch events.
We will introduce more products, where AI applications.
Xiaomi branded business, we will continue escape the stable and solid cooperation with Xiaomi.
We have also got to sit and more cooperation with Xiaomi and the future.
Okay.
About the channel, we don't expect a major channel shifts a push on the branded business in short term compared to 2021 with our overseas expansion and the sales contribution on which as a percentage of total revenue will increase and 2021 and.
In terms of revenue breakdown for 2020 revenues from Robbie branded business and Xiaomi branded business contributed nearly half and half of full year 2020.
With this we have been wildly branded business approximately 50% from online and two restaurants, and Nebraska from offline and done from exports, which mainly consists of rami blended rent per robot.
Within the online channel.
On the Combi Xiaomi opening was the largest contributor followed by doing bolt on.
Two more and suni.
We saw on light contribution increased during the second quarter of 2020 well with the recovery of offline channels and the second half we do this and major channel shift caused by the Covid items for full year 2020.
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Oh, Okay. So quickly translate.
Mr Chan.
Additional comments.
So here's the other three points and our strategies go to a channel expansion, just first and heading into 2020. One we saw a meaningful recovery about the offline channels across China market and doing well.
Well, we will expand to all of our off price stores and as well as to improve the apparel all flight operating system, including the user experience and the Iot design and whether the inquiries to all play out late for 2021.
And so Tony and stay out and we will Matan and very good operating just tell me and capabilities built on like Oh, My Chow news with you open a gym dosing schedule and.
And not only that we have been expanding our channels and marketing she was with them on new digital media such as adult Union on quite a show and other things such a new media will be development training for our marketing and the development of other channel expansion as well.
So in 2020 one.
That's the Oh simple from album, it's Jim.
And so that's helpful.
Carl.
And so you don't get hit and pencil so Glenn anytime on you a bunch of other helpful. Thank you.
The next question comes and you don't return, it's nice to see.
Go ahead.
Wanted to.
She said and it goes just over the winter I think about taking my question. The first one is I hope it's up to your gross profit margin and has recovered and in this quarter or what is the biggest reason for this gross profit margin recovery and a weird this trend.
On the.
Continue and the 'twenty to 'twenty, one and that's my first question and all I have.
And that's a lot.
Yeah.
Yeah.
Okay.
We are confident on the recovery on margin fine.
As we help these children and the quality quotes judges on default and perspective.
We will continue to shift and why don't we branded business and put them as towards diversification and introducing more high end products with higher margin and high and S piece and the revenue contribution of this new product will increase.
And we will continue to face on some specific O S. T use of low margin across other lines and.
Such as from the sales of low and Washington, and Kansas City with interest with Obsequence has mentioned just now due.
And due to their processes and we've been taking we expect gross margin to recover in 2020 one.
And my second question is since you have a good relationship with Xiaomi and you have to go on Iot.
On platform business and the Xiaomi also.
They're like shark home share like that so how can you balance your product and and the Xiaomi platform and the Europe Hustled and that's my second question.
Okay.
Yes.
Xiaomi and say, China, she and her.
<unk> come out and then Louis being hired just released on how many assets you don't know to each on Clos and what's your long term and you can function.
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And they don't want to put it through our tier two cycles of the Germans the computer and due to their shoes, and who I'm sure. If he's on the Golden Eagle hobby tariff on that highway to sell either to go come in and she doesn't know me I believe you force you want me to shine.
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Well done on Syngenta here.
Wish on this organization and you can make on linear shaped and agenda and shouldn't that.
And that's what I'm going to just show that you have taken on them. So quick question on James.
On me I believe she is Joshua unless you have a little here for Xiaomi, and Ultralow and delicious suddenly and functional.
Oh, Okay, I will quickly translate Mr. Chen's stepped back and I said.
And I was trained outrageous.
And the Johnson from three person and that is so Thursday is.
It's regarding step Oh pass almost xiaomi and Oh, our products on which connects to the show I don't ship and so if theres, Chile, where you can sell some other stage, but on the senior management of Xiaomi recently that they clearly have the size down their Iot platform and Delaware.
Have seen a growing share and Mt jobs shall I told you and.
And in my Kid and actually most jobs at many of our Iot products can be and are have been Ah connected with a shy at home share and we also saw those products that we sold on European platform are very welcome.
This definitely is about the sweeper robot business.
So actually and I. So you'll know that we have incorporated with xiaomi on there and so on their sleep a robot business since 2019, and just help us to develop our on a family.
And the only brand and <unk> to expand our donut day in and that's why other global market.
And certainly we are also seeking more and more cooperation with Xiaomi and we think Oh, we will have many opportunities to expand our product category accomplishing wisdom and.
Sure.
And so that that's the answer for the question.
And that's terrible.
The next question is from Vincent.
And with Needham and company. Please go ahead.
Thank you management for taking my question I have two questions there.
The first question is.
Can management talk about the view.
The overall home appliance market and 2021.
And we've seen competitive pressure from industry.
Our leaders, which may cause a price war.
And how was the first two months of 2020, one console box in terms of the debt.
Customer demand on my own.
Second question is about how much did eat and national market, contributing and fourth quarter and <unk>.
The opportunity, we see that it can grow into.
2020 one thank you.
Yeah.
Yeah.
Okay.
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So the higher degree share it if we showed our issue and we usually see.
On the Yodlee who'll share with whom merchant on here your Alibaba, how much EBITDA, earning our union and go to a home either to share you go and we are pushing that agenda.
And many of them go up on me and a yeah and what do you guys. Just before Shelby do you share channel all the time going to bundle do cause extra seats on from other conduct two nice job on indulging me on there to QE its already or in a QE shall we go to each of them turned on what I'm Gonna do Don and incurred will be surgical on door total direct Angeles cause so did you touch on.
Could you talk about ego, he might just want machines and I kind of on seeking guns on AWS.
And so oil compared to say 10 on carcinoma in situ tradeoffs utilization.
And if your phone zone. So at least what would you do you go home and interest.
And I'm wondering if I'm being day, you look where they didn't go to income issues, though do you go and paid off other dummies somebody's on somebody that you go. So do you go home and do you have a if I'm going to a day seemed no volume.
And though school good share do that she played on zone special woman and Jade I'll say shouldn't uncle hinge on punching.
And we along with Omega you'd see a lot of them relocated up on and I wish you until you go one to come into the moving on would you well know how should create lesion and wages. So you're picking up on minimum wage and put us on homes that dish Amanda channel usually follow up on that should all Kim Lee Joe G G, but their quota sue them and she is on a per day.
Based on their fleets, where you're going to and hobby free Chunghwa women's H and I won't put in channel.
And Oh, My Gosh, I mean channel you should put on.
Oh, okay, so it sounds like and so.
So and now you're at 2020 and we saw the pressures of the whole industry due to their call me and 19 are with regard to their growth are the copper gold zone.
And as long as the earnings but heading into 'twenty. One day, one we saw a day recovery out there how industry, so krista and we saw that.
Consumers turn more attention to smart codecs total predicts, especially some Iot products and and we can see are the domestic the domestic market of just Weibo Rabat has an increase and very quickly.
The start up and this year and you can see that Oh during day AWD a debt, we recently hosted and do a lot of people and consumers.
A lot book and so on the Iot experience and it gets smarter and smarter product and go with things to Iot and buybacks you spell out the whole Iot <unk> home industry, Husky and a more recognition compared to prove those things.
And are regarding to the commutation Oh, well, we think that many out there traditionally held up accounts is or any and as long as many companies. They put a shift our focus to work on and develop their smart codecs and so we think this is a trend but.
With regards to our holistic Iot solutions is why and the Iot and experienced their services with think well we remain the leading position interest perspective and.
So we will increase our resources, our branding and R&D and <unk>.
Iot holistic solutions and to improve the health comprehensive Iot experience.
Oh, that's the answer for the first question and I'll go and how does it go up and did you say how you.
And when you talk all day, well Linda you would have used up more women and men.
And say junior and distributable cash you say 20, and she put you on them at the time being bullish with other have actually on the 2000 and Florida some debt.
Yeah and easy to do.
Our sandal co.
And then she and I should she theaters and dump and it was just how much we're not stupid and duck total debt.
And so did you do.
Hello.
And listen to their total and when the U G. So if you need any would you say how long should knock on me on them and that's whether you are free to Hardie was into our day to book and that you don't you need on want to I don't have this fall.
Oh, Okay, I watch how free so and tariff touching about our global market expansion and.
And as you'll know that we have expanded our extra market since the fourth quarter of last year and heading into the first quarter on this year, we have been rapidly expanding our global market, especially on flower and balmy brand expand our rubber business and and we also see some very robust and growth all like.
Multiple thoughts and of Calgary and go.
And my Kids and Oh after.
And trying to continue with think Oh, well, we'll get a very solid Oh gross thumbed are global and market and we're also seeking more channels as well.
Okay.
Okay.
Capital.
Yes. Thank you.
P J.
Yeah.
Okay.
And there are no further questions now I'd like to turn the call back over to the company for closing remarks.
Oh, Thank you once again for joining us today and you'll have the other questions. His kind of after a day kind of information on our website or at the past and they grew up on Investor Relations consultants all day.
You all have a good day and night.
Yeah.
This conference has now concluded.
And again thank you.